BILL ANALYSIS Ó
AB 975
Page 1
ASSEMBLY THIRD READING
AB 975 (Wieckowski and Bonta)
As Amended May 24, 2013
Majority vote
HEALTH 12-7 APPROPRIATIONS 11-5
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|Ayes:|Pan, Ammiano, Atkins, |Ayes:|Gatto, Bocanegra, |
| |Bonilla, Bonta, Gomez, | |Bradford, |
| |Roger Hernández, Gordon, | |Ian Calderon, Campos, |
| |Mitchell, Nazarian, | |Eggman, Gomez, Ammiano, |
| |V. Manuel Pérez, | |Pan, Quirk, Weber |
| |Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Chesbro, |Nays:|Harkey, Bigelow, |
| |Maienschein, Mansoor, | |Donnelly, Linder, Wagner |
| |Nestande, Wagner, Wilk | | |
| | | | |
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SUMMARY : Revises California's nonprofit community benefits
requirements to include multispecialty clinics and narrows the
activities that constitute community benefits, creates a
definition of charity care, requires the Office of Statewide
Health Planning and Development (OSHPD) to develop a
standardized methodology for calculating community benefits,
calculate the value of community benefits for submitting
entities, and to issue civil penalties for noncompliance with
filing requirements. Specifically, this bill :
1)Requires private nonprofit hospitals and nonprofit
multispecialty clinics to provide community benefits to the
community. Requires, by January 1, 2016, these entities to
develop, in collaboration with the community, a community
benefits statement (that describes the hospital or clinic's
commitment to developing, adopting, and implementing a
community benefits program), a community needs assessment
(that evaluates the health needs and resources of the
community it serves). Requires by April 1, 2016, the
development of a community benefits plan to achieve specified
outcomes. Requires the community health needs assessment to
be made available to the public for review and comment prior
to approval. Requires the assessment to be filed with OSHPD
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and updated at least every three years. Requires OSHPD to
make these documents available on its Internet Web site.
2)Establishes specifications for the community benefits plan
such as a list of services categorized by charity care; other
community benefits, such as health professions education,
subsidized health services, school based health centers,
research and contributions to community groups; community
building activities targeting underserved and vulnerable
populations; an estimate of the economic value of the
community benefits that the private nonprofit hospital or
nonprofit multispecialty clinic intends to provide; a
description of the intended impact on health outcomes
attributable to the plan, including short- and long-term
measurable goals and objectives; the name and title of the
individual responsible for implementing the plan; and, the
names of individuals on the private nonprofit hospital's or
nonprofit multispecialty clinic's governing board.
3)Establishes a definition for what qualifies as charity care to
mean the unreimbursed cost to a private nonprofit hospital or
nonprofit multispecialty clinic of providing services to the
uninsured, or underinsured, as well as providing funding or
otherwise financially supporting any of the following:
a) Health care services or items on an inpatient or
outpatient basis to a financially qualified patient with no
expectation of payment;
b) Health care services or items provided to a financially
qualified patient through other nonprofit or public
outpatient clinics, hospitals, or health care organizations
with no expectation of payment; and,
c) Community benefits, provided that the provision,
funding, or financial support of those benefits is
demonstrated to reduce community health care costs.
4)Clarifies existing law to specify that charity care does not
include uncollected fees or accounts written off as bad debt;
care provided to patients for which public or private grant
funds pay for any of the charges for the care; contractual
adjustments in the provision of health care services below the
amount identified as gross charges by the health care
provider; any amount over 125% of the Medicare rate for the
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health care services or items provided on an inpatient or
outpatient basis, any amount over 125% of the Medicare rate
for providing funding for health care services or items with
no expectation of payment provided to financially qualified
patients through other nonprofit or public outpatient clinics,
hospitals or health care organizations; or, the cost to a
nonprofit hospital of paying a tax or other governmental
assessment.
5)Applies this bill's provisions to private nonprofit acute care
hospitals operated or controlled by a nonprofit corporation,
as defined, that has been determined exempt from taxation
under the United States Internal Revenue Code (IRC), and
nonprofit multispecialty clinics, defined in existing law as
clinics operated by a nonprofit corporation exempt from
federal income taxation, as specified, under Section 501 of
the IRC that conduct medical research and health education and
provide health care to its patients through a group of 40 or
more physicians and surgeons, who are independent contractors
representing not less than 10 board-certified specialties, and
not less than two-thirds of whom practice on a full-time basis
at the clinic. Exempts district hospitals, children's
hospitals, and rural general acute care hospitals.
6)Requires OSHPD to calculate and make public the total value of
community benefits provided by private nonprofit hospitals and
nonprofit multispecialty clinics that bi-annually report
pursuant to this bill.
7)Authorizes OSHPD to assess a civil penalty against any private
nonprofit hospitals or nonprofit multispecialty clinic that
fails to comply with this bill in the amount of $100 a day for
delays in filing and not more than $5,000 for not using
approved accounting systems.
8)Updates Cal-Mortgage requirements to include the community
assessment required by this bill as an activity an applicant
must demonstrate participation in, if appropriate.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, initial costs to OSHPD (California Health Data and
Planning Fund) of approximately $2.2 million, with ongoing costs
after that of approximately $450,000 annually. Costs include
information technology staff for various data functions and
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accounting and reporting services staff to ensure compliance
with reporting, audit complex documents, develop regulations,
monitor overall compliance and assess penalties.
COMMENTS : According to the author, this bill will create a
standard definition of charity care that includes a refined
definition of community benefits for nonprofit hospitals.
Further, this bill will clearly define what constitutes charity
care, which must be a direct provision of care, not promotional
activities or cost containment, as currently provided within the
guidelines of "community benefit," and will improve reporting
requirements for greater public transparency in how hospitals
meet their charity care obligation, with rigorous financial
penalties for hospitals that fail to meet reporting
requirements.
In a report prepared by the Senate Office of Research (SOR) for
an August 15, 2012, hearing of the Senate Select Committee on
Charity Care and Nonprofit Hospitals, about 247 of California's
387 private hospitals may be eligible for certain tax exemptions
due to their nonprofit status in exchange for providing various
community benefits, such as charity care. However, these
community benefits are not uniformly defined or measured. This
ambiguity makes it challenging to hold hospitals accountable for
the special tax benefits they receive and determine if they are
providing meaningful community benefits. Furthermore, some
studies show many investor-owned hospitals and public hospitals
provide charity care and other community benefits similar to or
greater than their nonprofit counter parts.
According to SOR, the federal Patient Protection and Affordable
Care Act (ACA) generally mirrors much of California's existing
state requirements for nonprofit hospitals. The ACA also
includes new reporting requirements. Nonprofit hospitals are
required to report to the Internal Revenue Service (IRS) the
results of the community needs assessment and if all identified
needs are not addressed, they are required to provide the
reasons why. Hospitals also must submit audited financial
statements to the IRS. These reporting requirements are in
addition to the preexisting requirements of Form 990 and
schedule H. Failure to comply makes hospitals subject to an
excise tax penalty of $50,000 and the loss of their federal tax
exemption.
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The California Nurses Association (CNA) writes in support of
this bill that it seeks to define charity care for nonprofit
hospitals and refine what is considered "community benefits" to
ensure California's nonprofit hospitals are fulfilling their
mission statements and providing community benefits in exchange
for their tax-exempt status. CNA adds that in 2010, more than
seven million Californians lacked health insurance and that even
with so many in need of health care, California's nonprofit
hospitals benefited $1.8 billion from their tax-exempt status.
According to CNA for the most recent year data are available,
half of California's nonprofit hospitals provided 2.46% or less
of their operating costs on charity, well below the federal
standard of 5% needed to maintain tax exempt status. Nonprofit
hospitals accumulated $4.5 billion in profits that same year,
close to half of that by two of California's largest hospital
chains Sutter Health and Kaiser Permanente. Health Access
California (HAC), Consumer Federation of California, and
Consumer Watchdog all write in support of the definitions in
this bill for what constitutes charity care and community
benefits. HAC argues that hospitals use the term "uncompensated
care," which means bad debt where collection agencies, some
owned by nonprofit hospital systems, pursue the uninsured to the
point of bankruptcy and seizure of their homes; therefore,
defining charity care as care for which there is no expectation
of payment, hospitals would no longer be able to claim bad debt
as charity care.
The California Hospital Association opposes this bill in part
based on the re-write of community benefits law, indicating,
instead of the current system where communities collaborate with
non- profit hospitals to tailor a realistic community benefit
plan, this bill now says that hospitals must address every
identified need, regardless of cost and demonstrate that they
are achieving measurable results. Kaiser Permanente writes in
opposition, stating the very narrow definition of community
benefit in this bill could exclude critically important programs
for low-income, uninsured, and indigent Californians. The
California Chamber of Commerce writes businesses are becoming
increasingly aware that improving the health of their
communities at large is good for everyone. Community-based
organizations play a critical role in improving the health of
the community through prevention initiatives that make
health-promoting changes in the places where people live, learn,
work and play. By revising the definition of charity care, this
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bill will result in reduced funding for those community-based
organizations and jeopardize community based prevention efforts.
Analysis Prepared by : Lara Flynn / HEALTH / (916) 319-2097
FN: 0000962